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ENRC WINS LANDMARK COURT OF APPEAL PRIVILEGE CASE AGAINST SFO

Court of Appeal finds that documents prepared by ENRC during an internal investigation are protected by privilege, overturning a controversial High Court ruling last year.

ENRC continues legal proceedings against Neil Gerrard and Dechert LLP for breach of contract and fiduciary duties including intentionally leaking privileged and highly confidential information to the press in order to trigger the SFO investigation.

5 September 2018 (10:30 GMT) London, The Court of Appeal has today overturned a controversial ruling by the High Court from May 2017, which threatened to have significant implications for companies carrying out internal investigations.

At issue were documents generated during an internal investigation conducted by Dechert LLP, led by partner Neil Gerrard, that was first triggered by a whistleblower email. In a thorough vindication of ENRC's position, the Court of Appeal has overturned the original judgment and upheld ENRC's claim to privilege in respect of the overwhelming majority of the documents, including witness interview notes prepared by Dechert as well as a "books and records" review undertaken by forensic accountants.

As the trial judge had found, ENRC took all the steps that might be expected of a responsible corporation in response to the whistleblower. Crucially, however, the Court of Appeal recognised that the dialogue with the SFO did not preclude the investigation from being privileged. Contrary to the SFO's case, ENRC had never intended or agreed to share materials from the internal investigation with the SFO, and the SFO had never even run an argument based on waiver of privilege.

ENRC maintains that the SFO's approach was fundamentally misconceived and that the proceedings, which have resulted in wholly unnecessary costs (both to ENRC and the taxpayer), should never have been brought. ENRC will now be seeking recovery of millions in fees from the SFO.

Michael Roberts, Partner at Hogan Lovells representing ENRC commented: “This historic ruling by the Court of Appeal is significant not just for ENRC but for any company faced with undertaking an internal investigation in response to a whistleblower or other allegation of wrongdoing. It is critical that companies are not penalised for acting responsibly, and are able to instruct lawyers to conduct investigations without fear that the authorities will later be able to demand all of the lawyers' work product."

ENRC also continues to pursue related legal proceedings against Dechert LLP and Neil Gerrard (the global co-head of Dechert's white collar and securities litigation practice), who conducted the internal investigation and advised on ENRC’s engagement with the SFO between 2011-13.

In the Particulars of Claim, which can be requested through this website, ENRC claims (amongst other things) that Neil Gerrard deliberately leaked privileged and confidential documents to the press in July 2011 in order to "kick start" an expansion of the investigation. Mr Gerrard arranged for an envelope of confidential and privileged documents to be collected from Dechert's reception. Those documents subsequently formed the basis of an article published in The Times on 9 August 2011, which directly led to the initial approach from the SFO to ENRC the very next day.

Mr Gerrard then described himself as being in "rape mode" and that he wanted to "screw" ENRC for millions of pounds in fees. True to his word, Mr Gerrard went on to bill ENRC over £16 million in fees.

Separately, ENRC has launched disclosure proceedings against the SFO premised on ENRC having civil claims against the SFO for misfeasance in public office as a result of its unlawful collusion with Mr Gerrard, involving numerous unauthorised (and unfounded) disclosures by Mr Gerrard, covert (and subsequently deleted) text messages, and private meetings in "out of the way" places. One internal SFO document even acknowledged at the time that Mr Gerrard might be "up to no good".

Mr Gerrard was also the subject of an anonymous whistleblower letter to David Green QC in July 2012 which raised serious concerns about the unhealthy relationship between Mr Gerrard and a senior official at the SFO. The SFO has now admitted that it failed to take proper steps to investigate the allegations.

Further significant evidence continues to come to light and to support ENRC's claims against both Dechert and the SFO.

ENRC has filed an application seeking pre-action disclosure from the SFO, premised on civil proceedings against the SFO for a number of claims including misfeasance in public office.

Whistle-blower letter in July 2012 flagged “serious concerns” over conduct of senior SFO staff, including former Director. Same whistle-blower letter also claimed that the SFO staff had leaked confidential information about ongoing investigations to Neil Gerrard, a Partner at U.S law firm Dechert LLP.

SFO admits it carried out an internal investigation at the time, but that “no written record of the investigation or findings were kept”; there is “no record of what policy or procedure was followed in conducting the investigation (if any)”; and “[n]o disciplinary action was taken”.

ENRC has filed a claim against Dechert LLP for breach of contract and fiduciary duties including intentionally leaking privileged and highly confidential information to the press, multiple unauthorised disclosures to the SFO and overcharging.

Update: Following media enquiries into last week’s news release, ENRC has updated its media website to help better inform readers of the current legal action against Dechert and the SFO after the leak of a whistle-blower letter, and responded to the SFO’s statement. (See below).

Eurasian Natural Resources Company Ltd (‘ENRC’) has today called for an independent inquiry into the ongoing criminal investigation by the Serious Fraud Office (‘SFO’), after the agency admitted that in 2012 it received but failed to properly investigate a whistle-blower letter.

The company has also filed an application in the High Court of Justice, London, seeking pre-action disclosure from the SFO, premised on civil proceedings against the SFO for a number of claims including misfeasance in public office.

Whistle-blower letter and pre-action disclosure application against the SFO

The whistle-blower letter from July 2012 raised serious concerns about the unhealthy relationship between the SFO and Neil Gerrard, a Partner of Dechert LLP, including the ‘leaking’ of confidential information by the senior SFO officers with the “tacit agreement” of the former SFO Director and the former Attorney General. This letter, addressed to former SFO Director David Green, and other correspondence directly relate to the SFO’s current investigation into ENRC, which has been ongoing since April 2013.

ENRC’s solicitors, Hogan Lovells International LLP, wrote to the SFO with a Freedom of Information request, asking for among other things, details of the steps the SFO took to investigate the allegations raised in the letter.

The SFO’s response, in March 2018, admitted that its investigation consisted of no more than a “senior member of staff” speaking to the “person believed to be the subject of the allegation”, that “no written record of the investigation or its findings” were kept, and there is “no record of what policy or procedure was followed in conducting the investigation (if any)”.

It appears that the SFO did not follow its own complaints procedure, which, at the time, specified that, if a complaint was of a “more serious nature (for example if criminality is alleged) the Director will appoint an independent reviewer (external to the SFO)”. ENRC believes there is a strong public interest in an independent inquiry into properly investigate these matters.

The company has also filed an application seeking pre-action disclosure from the SFO, premised on civil proceedings against the SFO for a number of claims including misfeasance in public office. The application seeks disclosure of, among other things, the notebooks of the SFO’s former Chief Investigator, which the SFO inexplicably failed to disclose in previous proceedings between the SFO and ENRC.

Current proceedings against Dechert LLP

ENRC has also issued claims in the High Court of Justice, London, against Dechert LLP and Neil Gerrard, who advised principally on ENRC’s engagement with the SFO between 2011-13. In the Particulars of Claim, which are publicly available, ENRC claims that Dechert and Neil Gerrard acted “negligently”, “in breach of contract” and/or “in breach of fiduciary duties” causing “loss and damage” to ENRC.

These proceedings are separate from the costs proceedings filed by ENRC against Dechert LLP in October 2013, in which Master Rowley found that there was an “order of magnitude” of Dechert’s extraordinary fees which was “impossible to ignore” and which justified a line-by-line assessment of the costs by the Court.

The new Claim relates to the period of August 2011 until April 2013, when ENRC was listed on the London Stock Exchange. According to the Particulars of Claim, this work lasted for over two years, during which Dechert charged over £16 million in legal fees. ENRC has outlined in the Claim that the alleged “wrong advice” and “reckless conduct” of Dechert and Neil Gerrard had the result of increasing the quantity of work carried out leading to inflated fees, and extensive unnecessary disruption to ENRC’s business.

The Claim also alleges that Mr Gerrard deliberately leaked privileged and confidential documents to the press in 2011 and again in 2013. It alleges that in July 2011, Mr Gerrard wanted to “kick start” an expansion of the investigation, and arranged for an envelope of confidential and privileged documents to be collected from Dechert’s reception. The Claim alleges that the leaked documents formed the basis of an article published in The Times on 9 August 2011, and that the SFO first contacted ENRC the very next day.

A spokesperson for ENRC said: “This new evidence raises serious concerns about the SFO, the unethical behaviour of senior members of staff, and the procedures it did – or did not – follow. We have tried to meet with the SFO to discuss these claims but have so far been refused. We hope this disclosure will force the SFO to answer these important questions.”

Update, 19 June 2018: In response to last week’s release, the SFO made the following statement: “We see no merit in the application issued by ENRC. Before they made this application for a narrow range of additional information, we told ENRC that we will be able to provide it if it exists (emphasis added). We remain satisfied that the issue was handled appropriately.”

Following careful consideration, ENRC has today again expressed severe doubts whether in fact the issue was handled appropriately. Clearly by its own admission, the SFO is currently unsure what evidence it has or does not have relating to an ongoing important investigation over five years old. This is clearly of concern, especially considering that in previous legal proceedings the SFO claimed it had disclosed all relevant documents pertaining to the ENRC investigation.

If it transpires that the SFO does in fact have some of this key evidence, but chose to withhold it from previous proceedings, there will be serious consequences for the investigation.

A spokesperson for ENRC said: “We are disappointed by the SFO response. It seems to be that the SFO doesn’t know what evidence exists in this investigation, or that it is withholding evidence, both of which are deeply worrying”.